The Economics of Sustainable
Development in SmallCaribbean Islands, Dennis Pantin

CHAPTER 2

THE ECONOMICS OF SUSTAINABLE
DEVELOPMENT IN SMALL ISLAND

ECONOMIES

“Once upon a time, an entrepreneur
was cast away on a desert island. By good chance, the island lay on a busy
trade route, in a convenient time zone. The entrepreneur cut down all the trees
and exported them to Japan, sold off all the coral for jewellery, dug up the
island's gold and used the proceeds to set up schools, homes and factories for
a new Hong Kong, where everybody lived prosperously ever after on the products
of their brains, high technology and imported raw materials. Is that
sustainable development or not?" (Economist, Sept. 15,1989.)

There is an understandable
and unavoidable tension everywhere between the demands for employment, improved
wages and living conditions today and the environmental sustainability of the
economic policies implemented to achieve these demands. This tension is
particularly acute in many small island economies in the world, and certainly
in those of the Caribbean where there is widespread unemployment and poverty.

It may even be too generous
to describe the relationship between the two as marked by tension. In fact, it
is perhaps more accurate to suggest that the issue of sustainable development
is not really on the agenda of the majority groups ‑including the
decision‑making and influences elites ‑ in Caribbean islands. This
is neither criticism nor condemnation. It is simply an interpretation of the
dominant reality.

It is not that at least, a
substantial minority, is unaware of, or unconcerned with environmental
degradation. Rather, the point is that even those who are sensitive to the environmental
issue (as opposed to a small, environmentally conscious minority) have not yet
found solutions, simultaneous or otherwise, to three problems.

The first problem is
economic survival ‑ whether in terms of profit‑making of firms in
depressed and liberalised economies; or of wage earners struggling to make ends
meet in the face of a continuous decline in the real value of their income; or
of the Herculean efforts to survive facing those without either a job or a real
business enterprise.

The second problem
which needs to be solved is the environmental impact of the socio‑economic
activities engaged in to address the three direct methods of economic survival
described above as part of the first problem of economic survival.

The third problem is that of
anticipating and avoiding, or certainly mitigating, the impact of the
environment‑ via natural hazards or disasters‑ on economic
survival. This third concern is the perhaps the least appreciated in small
island economies, particularly in the Caribbean, although it, in fact, may be
the most significant.

The reality is that, to
date, economic theory and policy practice, have not found any easy, or even
complex, simultaneous solution to these three problems. In other words there is
no clear indication of the strategies and operational systems and mechanisms,
as Chapter 1 suggests, which would easily translate the aspiration of
sustainable economic development into practice.

This situation
is not unique to small islands. The fact that the overwhelming majority of the
world's environmental degradation originates in the rich, industrial economies,
tells us, in the most convincing manner, that environmental concerns have not
become a central part of their policy‑making framework.

Island economies
may, however, offer the ,world a golden opportunity to test alternative
theories and strategies for achieving sustainable economic development for
several reasons.

First, most
island economies are almost completely dependent on their natural environment*
(including natural resources) for their economic survival. With the exception
of Hong Kong and Singapore, most populated small, island economies live off of
the earnings of raw material merchandise exports based on their mineral or
arable land, (and sometimes fishery resources), or off of invisible service
exports based predominantly on tourism which is, of course, dependent on the
natural environment.

Second, island
economies are marked by fragile ecological systems, easily affected by socio‑economic
activities. In fact, small islands can be considered, from an environmental
impact perspective, to be comprised solely of coastal zones. In other words,
there is an immediate, direct impact of terrestrial‑based socio‑economic
activities on the marine environment.

Third, island
economies are also highly susceptible to natural hazards particularly cyclones
and hurricanes. Many of the current scientific predictions suggest, further,
that global climate change, in particular global warming and related mean sea
level rise, will exacerbate the impact of natural hazards.

Fourth, island
economies represent a bewildering variety of socio‑political and economic
and ecological systems across the world's continents. Hein notes that islands
comprised 71 of the 94 countries, territories or areas, with populations of
less than one million as identified in the 1982 UN statistical yearbook.
(Hein,1990:35) Table 2(i) and Maps 1‑6 provides a summary account of key
characteristics of islands across the globe.

From a methodological point
of view, therefore, island economies provide a varied enough universe from
which to identify more generalisable strategies for sustainable economic
development.

If there is any context in
which sustainable development would appear to make sense, it would therefore
seem to be in small island economies because of the mutual reinforcement of
these four above mentioned reasons. What then does the economic literature
suggest in terms of small islands?

Literature Review

There is no general body of
economic literature on the very specific issue of the sustainable development
of small islands. There is, however, a more general literature which does
allude to, and sometimes directly address, the question of sustainable island
development. (The main non‑Caribbean literature reviewed include Dommer.
&Hein (eds.)1985; Benedict (ed.)1961; WORLD DEVELOPMENT, 1980&1993;
Crusol, Hein and Vellas (eds.) 1988; Blackman, 1988; Seawar,1990; Dolman,1986;
UNCTAD,1988a&b, 1990; ECLAC, 1990; Beller, d'Ayala and Hein,1990, as well
as abstracts from UNESCO,1992.) Four
main themes have been identified from a review of this literature. These are
first, a definitional and measurement concern; second, a focus on the problems
and obstacles which small islands face; third, the observation that economic
theory and policy practice in the small island context is generally insensitive
to this very reality; and finally, there is an even more general blindness of
the economic literature to the environmental base of island economies. The
first two themes dominate the literature. We now turn to a further elaboration
of the literature on these four themes.

Definitional and Measurement
Concerns

Two initial observations can
be made on this theme. First, there is no universally acceptable definition of
what constitutes a small island. As Dolman notes:

“The definition of a small
island is a matter of interpretation rather than fact. There are more than
500,000 pieces of distinctly subcontinental land territory which can be
generically defined as islands. They range is size from sandbanks and pinnacles
of rock, virtually without a measurable surface, to extensive land masses such
as Madagascar.”( Dolman 1985:40)

The second, initial
observation is that, as Dolman also notes, although international law is the
normal arena for settlement of definitional concerns, it was only in 1930 that
a first significant effort was initiated to define an "island."

In fact, two main types of definitional and measurement approaches
can be found in the literature on small islands‑ the socio‑economic
and the climatic. (Several of the papers in Dommen and Hein(eds.) 1985 provide
exhaustive reviews of these alternative definitional approaches).The first, and dominant approach uses socio‑economic
criteria to define smallness. The most common indicator used is that of
population. Differing studies use a cut‑off point of 1, 10 or 15 million
people or less to define small societies, with islands merely being a sub‑set
of the general categorization. Other economic criteria used include land area
(or arable land area) or size of Gross National Product (GNP).

The second, less dominant, definitional approach uses the climatic
influence of islands to distinguish small from continental types. Doumenge
provides a helpful summary of this climatic approach as outlined below.

" Islands must be
distinguished from continents. The effect of continental mass is to generate by
its volume its own conditions of biological and natural environment and of
partitioning of space. When an island has an emerged volume large enough to
generate its own climatic effects, it enters the continental category. In
practice this threshold is reached when a mountainous mass of more than 1,000
metres of average attitude extends over more than 20 thousand sq.km. islands
like Cuba, Hispaniola (Haiti and the Dominican Republic), Iceland, Sri Lanka,
Taiwan, Tasmania, etc... not to mention vast entities belonging to arc systems
(Japan, Philippines, Indonesia, New Guinea, new Zealand) or included in
continental plates (Madagascar, British Archipelago) are thus to be classified
in a continentalized island category

... The true small islands
are those which are subject to, and cannot modify, the influence of the oceanic
hydroclimate because their volume is too small to have any effect other than to
accentuate the contrast within one system. If there is no mountainous mass,
oceanic insularity will keep all its characteristics on emerged areas of up to
3,000 to 4,000 sq.km. If there are important mountainous areas rising to above
an average of 1,500 to 1,800 metres, oceanic insularity is already modified
when the surface of the island exceeds 1,000 sq.km." (Doumenge,1985:70)

Other categorisations of
islands include by latitude (tropical, temperate or arctic), or by altitude,
underlying geology or island structure.

Against the background of this
definitional and measurement debate, Dolman
defines a small island, for example, as:

" ..a territory
surrounded by a large body of water with a lend
area of less than 5,000 sq.miles (13,000 sq.km.) and a population of one million or less." (Dolman, 1985:40)

Streeten takes a more pragmatic approach:

" We all know that we
can define a country's size by its population,
or by its area, or by its national income. These criteria do not always give
the same results, but we know a small country when we see it. The best simple
measure is population." (Streeten,1993: 197)

In this particular
publication we define all of the Caribbean islands as small and also are
sensitive to the coastal regions of Central .and South America, particularly
the Guyanas, which are isolated from their hinterlands, and where the majority
of the population live. Three main reasons inform this approach. First, the
fact that all of the English speaking countries already share a common economic
union ‑ the Caribbean economic community.

Second, all
Caribbean countries share a common historical experience and therefore have a
shared experience and cultural similarities. Third, the Caribbean sea is the
common border of all Caribbean islands, and
neighbouring mainland states since maritime activities ‑ both positive
and negative ‑ impact on all of the abounding lands. It is therefore
considered invalid to exclude some Caribbean islands from the classification as
`small islands.'

Problems and Obstacles faced
by Small Islands

The dominant and overwhelming concern of much of the
literature on small islands, however defined, is with the delineation of the
specific problems and obstacles which lie in the way of small islands achieving
economic growth and development, far less sustainable economic development. The
evidence can be found in the titles of publications devoted to small islands,
for example, UNCTAD, 1990 ‑ " Problems of Island Developing
Countries and Proposals for Concrete Action";
Searwar,1990 ‑ "Intrinsic Disabilities of Island Developing
Countries" ,Blackman,1988 ‑"Problems of Island
Developing Countries". ,Briguglio and Kaminarides, in the Introduction to
the recent, 1993 special issue o! the journal, WORLD DEVELOPMENT devoted to
" Islands and Small States: Issues and Policies" note, almost as a
matter of incontrovertible fact that:

As expected, the majority of authors emphasized the disadvantages
associated with small size."

We can
distinguish between two categories of problems or disadvantages listed in the
literature": those inherent in the condition of `islandness' and non‑island
specific socio‑economic problems.

Peculiar `Islandness'
Disadvantages

Three main disadvantages can
be found in the literature which relate to a particular and peculiar
'islandness' disadvantage. I These are physical remoteness from major
continents and/or markets; environmental fragility; and a particular
vulnerability to natural hazards or disasters.

The economic expression or
remoteness lies in the costs of movement of goods or people. Brookfield notes
that technical change has been reducing the economics of both ocean and air
transport to small islands:

"... The modern
revolution in shipping and cargo‑handling, plus the growing size of
aircraft, have greatly worsened the locational disadvantage of islanders over
the past 20 years. The modern transport revolution has reached them mainly
through the displacement from island trade of socially‑useful smaller
wooden craft by second­ to fifth‑hand coastal ships in whole regions such
as the Caribbean and the pacific islands. As maintenance costs and replacement costs of such ships have soared, services have
deteriorated and the cost of moving goods and people have risen."
(Brookfield, 1990 :27)

Briguglio has estimated
transport and freight costs as a percentage of exports between 1987‑1989.
The average for 139 countries was some 20 %, for 117 developing countries is
was 23 $ and for 25 small island developing countries the average was some40 %. (Briguglio,1993)

In terms of the second
disadvantage of ecological fragility,island habitats are prone to a high degree of endemism relative to their
size. The Caribbean is reported, for example, to support over 130 restricted
range species and nearly every Caribbean island includes or forma an endemic
bird area.

The third `island‑specific'
disadvantage is perhaps the most telling. Briguglio has devised an index of
disaster damage between 1970‑1989 in 65 countries with disaster
incidence. While the overall ratio is
31%, thirteen small island states recorded the overwhelmingly highest
ratio of 61%. (Briguglio, 1993)

In the case of the
Caribbean, Collymore, McDonald and Brown. (1993), have estimated the impact of
natural disasters, reproduced in Table 2(ii). They estimate that hurricanes
between 1722‑1990 have caused 43,000 fatalities with the total damage
between 19601990 estimated at US$3 billion. Volcanic eruptions concentrated in
three islands have cost 30,621 lives, 29,000 of which were lost in the famous
1902 volcanic eruption in Martinique. Collymore et al also estimate that
earthquakes have resulted in some 16,000 fatalities since 1691.

The prognosis for the future
also suggests that climate change will lead to a exacerbation of the natural
disaster impact. The UNEP background paper for the April, 1994 Small Island
Developing countries (SIDS) conference warns that:

The wider Caribbean region with its many island
based economies such as fishing and/or tourism is particularly vulnerable to
the physical changes associated with climate change and sea level rise." (UNEP, 1993:7)

Gomes also notes in another
background paper for the SIDS Conference that ten of the fifteen most recent
natural disasters which led to individual claims of over US$ 1 billion involved
wind damage. (Gomes,1993:10)

In the light of this
empirical evidence it is a moot point to note whether, to date, it is the
environment which has had a greater negative impact on man in the Caribbean, rather
than the other way around, as is commonly felt.

There are more instances of
this second category of disadvantage in the literature including limited
natural resource endowment; reliance on a few primary exports; diseconomies of
scale both in production for small domestic markets and in the provision of
social and physical infrastructure and public administration; substantial
openness of the economy with a high export/import dependence and national
security problems.

The examples of Hong Kong
(as the quote from the Economist at the start of this Chapter) and Singapore
indicate that human intervention can substantially reduce the significance of
most of these widely repeated disadvantages in the literature, although not
necessarily in a sustainable context.Members of the Organisation of Eastern Caribbean States and Barbados
have reduced the national security problem, for instance, by a defence treaty
which permits of mutual assistance in areas such as prevention of smuggling,
illegal immigration, pollution control, customs and excise control, protection
of offshore installationsand threats
to national security.

In the light of the
non-binding nature of the non-island specific disadvantages and the ability to
moderate the three island-specific obstacles noted above, it is therefore
interesting to speculate on the reasons for the overwhelming negative focus of
the literature on small islands.The
first logical reason may simply be that small islands do face particularly
severe and intractable difficulties in their developmental efforts.While this is undoubtedly true of some of
the extremely small or remote small islands, it is also important to note as
UNCTAD observes that:

“Many of the problems of
island developing countries (IDCs)are those of development in general
and are by no means exclusive to this category”

Persaud also notes that the
1991 per capita aid receipts for islands with less than 1 million people was
US$145 whereas the average for all developing countries was US$19 (Persaud,
1993:12)

A second explanation for
this negative focus lies in the focus lies in the focus of much of the literature
on justifying assistance from the international or donor community.This second reason can be discerned from
tracking the evolution of the literature on small islands.Hein identifies some of the earliest
concerns with small islands as coming as relatively recently as a 1963 seminar
of the Institute of Commonwealth Studies of the University of London on
“Problems of Smaller Territories” (Benedict, ed. 1967); a 1972 Conference in
Barbados on “Development policy in small countries (Selwyn, 1975); a 1981 Conference
of the Commonwealth Secretariat on “Problems and policies in small
economies”.Hein states that report of
the latter conference (Jalan, 1982):

“must be considered as
containing one of the most comprehensive analyses of economic problems of
microstates available so far.” (Hein, 1985:19)